Supply chain issues have dominated discussions about business and international trade since the outbreak of COVID-19. During lockdowns, staff illness led to labour shortages, and travel restrictions proved a stubborn hindrance to the progress of projects across the globe.
Pandemic protocols have now eased, and the relaxation of self-isolation and border control guidelines have alleviated some difficulties when facilitating trade agreements. However, no industry is free of logistics challenges quite yet.
Shockwaves from the war in Ukraine have rippled across the world, interfering with production and preventing many companies from overcoming the lingering impacts of COVID-19. As a result, many individuals and businesses face a cost-of-living crisis that will likely wreak further havoc on stock availability.
These obstacles have proved especially bothersome for the electronics industry, with operations being turned upside down by today’s most significant supply chain issues, including the microchip shortage.
So, what supply chain factors are contributing to production problems within the electronics industry — and what can manufacturers do to navigate them?
Current supply chain issues
In recent years, negotiating limited supplies and avoiding rising manufacturing costs has been near impossible for electronics companies, causing persistent bottlenecks and project delays.
Skyrocketing gas prices have raised concerns for several businesses that may now be forced to scale back production. UK car makers fear they will not deliver their usual output. Car assembly plants and electronics factories have closed in parts of China, and countries like Pakistan have even shortened their work weeks — limiting global component turnout.
To make matters worse, inflation has already hit double figures twice this year, leading to further price hikes and prompting many employees to request pay raises. Some manufacturing workers have also partaken in strike action, exacerbating pre-existing labour shortages within the industry.
The climate crisis will only worsen international trade disruption. Droughts have already begun to cause low water levels in major supply routes across Europe, like the Rhine, where some ships have been unable to transport three-quarters of what they would usually carry. As extreme weather becomes more common in years to come, this could become a common phenomenon.
Despite these challenges, the popularity of electronics (especially devices connected to the internet of things, like smartwatches) has peaked since the pandemic ramped up digitisation. And as organisations continue to adopt remote working policies, causing people to rely on technology to stay connected, this trend is expected to continue.
With the demand for consumer electronics spiking during lockdowns and revenue in this sector expected to show an annual growth rate of 7.17% between 2022 and 2025, electronics manufacturers already have their work cut out to keep up with demand.
But for many providers, there is one key obstacle to fulfilling an ever-growing order list: the chip shortage.
The global chip shortage
Microchips, also known as chips or semiconductors, are often called the ‘brains’ of electronics because they make informed decisions based on data, automating tasks like product maintenance and communication.
These small but mighty components are used in everything from medical instruments and washing machines to cameras, cars and mobile phones. But since the demand for chip-powered devices is constantly rising, and the chips needed to make them are increasingly scarce, electronics manufacturers face a supply and demand crisis.
Fortunately, there are ways for electronics manufacturers to develop supply chain resistance. Embracing digitisation, for example, is one of the best routes to speeding up production, as new technologies can help factories keep track of stock and mechanise time-consuming tasks.
Improving overall efficiencies within manufacturing processes is crucial to overcoming the chip shortage. Rather than simply selecting the lowest-cost components, siloed teams must collaborate to find the most profitable solution based on a range of factors like process cycle time and potential supply chain risks.
Electronics manufacturers may also need to source components from multiple suppliers to find suitable stock. In such a volatile market, it is essential to seek materials from reputable sources and remain vigilant against counterfeit parts in the expanding ‘grey market’.
Working with trusted electronics manufacturing services (EMS) providers like EC Electronics can ensure a safe and streamlined transition to supply chain resistance. By utilising our electronic design and product realisation services, developers can continue to deliver high-quality products despite the global chip shortage — and whatever may come next.
EC Electronics is an EMS provider with nearly 40 years’ experience in the electronics manufacturing industry. To learn how we can help with your next project, contact us at +44 (0)1256 461894 or email sales@ecelectronics.com.
